SAP Mentor, supply chain management enthusiast. Advocate for science as a basis to optimize the SAP supply chain. Active in Europe and North America. Sailboater, private pilot, motorbiker. At home in Tribeca, NYC.
The opinions expressed in this blog are mine!

Saturday, October 20, 2012

My favorite book right now is Daniel Pink's "A Whole New Mind". A simple book in many ways, and a most profound and well-researched one as well. At about 250 or so pages, it's a quick read. "The future belongs to a different kind of person," Pink says. "Designers, inventors, teachers, storytellers — creative and empathetic right-brain thinkers whose abilities mark the fault line between who gets ahead and who doesn't." Pink claims we're living in a different era, a different age. An age in which those who "Think different" may be valued even more than ever.

"...an age animated by a different form of thinking and a new approach to life — one that prizes aptitudes that I call 'high concept' and 'high touch.' High concept involves the capacity to detect patterns and opportunities, to create artistic and emotional beauty, to craft a satisfying narrative....High touch involves the ability to empathize with others, to understand the subtleties of human interaction..."

— Dan Pink, A Whole New Mind

What I found particularly valuable in Dan Pink's book were the "six senses" or the "six R-directed aptitudes" which Pink says are necessary for successful professionals to posses in the more interdependent world we live in, a world of increased automation and out-sourcing. You can quibble over parts of his book if you like, but I think there is no denying that these six aptitudes are indeed more important now than they ever have been. And I am convinced that us SAP consultants need to apply them more than ever.

Is there a new way of SAP consulting? I am not sure, but what I know is that the old way needs a lot of improvement. Following is more detail on Daniel Pink's six aptitudes - Design, Story, Symphony, Empathy, Play, and Meaning - and me taking a shot on how each may make us a better SAP consultant:

- Design. To many business people, design is something like what roller skates are for a defensive lineman. It's not mission critical. In our field, design is necessary (when we present ideas using slides, show data tables in a spreadsheet or build a model using lego - as I love to do). But most of us decorate instead. There is a difference between design and decoration:

"Decoration, for better or worse, is noticeable, - sometimes enjoyable, sometimes irritating - but it is unmistakably *there.* However, sometimes the best designs are so well done that "the design" of it is never even noticed consciously by the observer/user, such as the design of a book or signage in an airport (i.e., we take conscious note of the messages which the design helped make utterly clear, but not the color palette, typography, concept, etc.). One thing is for sure, design is not something that's merely on the surface, superficial and lacking depth. Rather it is something which goes "soul deep."

— Garr Reynolds - author of Presentation Zen

"It is easy to dismiss design — to relegate it to mere ornament, the prettifying of places and objects to disguise their banality," Says Pink. "But that is a serious misunderstanding of what design is and why it matters." Pink is absolutely right. Design is fundamentally a whole-minded aptitude, or as he says, "utility enhanced by significance."

Garr Reynolds says: "Design starts at the beginning not at the end; it's not an afterthought. If you use slideware in your presentation, the design of those visuals begins in the preparation stage before you have even turned on your computer (if you're like me), let alone fired up the ol' slideware application. It's during the preparation stage that you slow down and "stop your busy mind" so that you may consider your topic and your objectives, your key messages, and your audience. Only then will you begin to sketch out ideas — on paper or just in your head — that will soon find themselves in some digital visual form later. Too much "PowerPoint design," as you know very well, is nothing more than a collection of recycled bullets, corporate templates, clip art, and seemingly random charts and graphs which are often too detailed or cluttered to make effective on-screen visuals and too vague to stand alone as quality documentation."

We have to get better at designing our means of teaching, communicating, convincing and presenting of ideas.

- Story: Facts, information, data; it has never been more readily available. Especially in our profession. But we are using it, dealing with it and processing it in a rather boring and unemotional way...says Pink, "What begins to matter more (than mere data) is the ability to place these facts in context and to deliver them with emotional impact." Cognitive scientist Mark Turner calls storytelling "Narrative imagining," something that is a key instrument of thought. We are wired to tell and to receive stories. "Most of our experiences, our knowledge and our thinking is organized as stories," Story" is not just about storytelling but about listening to stories and being a part of stories.

I always get a much better reception if I wrap my advice with a story. Merely explaining the difference between 'pull' and 'push' is not nearly as effective and memorable, as telling the story of how the State of California did not allow train wagons to be pushed by the locomotive anymore. This came after an accident, where a 'pushed' train crashed into a Jeep left on a crossing and had a much more devastating effect than any pulled train could have ever had.

Story can be used for good: for teaching, for sharing, for illuminating, and of course, for honest persuasion.

- Symphony: Focus, specialization, and analysis have been important in the "information age," but in the "conceptual age" synthesis and the ability to take seemingly unrelated pieces and form and articulate the big picture before us is crucial, even a differentiator. Pink calls this aptitude Symphony:

"Symphony...is the ability to put together the pieces. It is the capacity to synthesize rather than to analyze; to see relationships between seemingly unrelated fields; to detect broad patterns rather than to deliver specific answers; and to invent something new by combining elements nobody else thought to pair."

Doesn't this sound like integration? The best consultants can illuminate the relationships that we may not have seen before. They can "see the relationships between relationships." Symphony requires that we become better at seeing, truly seeing in a new way. "The most creative among us see relationships the rest of us never notice," Pink says. Anyone can deliver chunks of information and repeat findings represented visually in spreadsheets and powerpoints, what's needed are those who can recognize the patterns, who are skilled at seeing nuance and the simplicity that may exist in a complex problem.

Symphony in the world of SAP consulting does not mean dumbing down information into soundbites and talking points so popular in our industry To me, Symphony is about utilizing our whole mind — logic, analysis, synthesis, intuition — to make sense of our world (i.e., Sales & Operations Planning), finding the big picture and determining what is important and what is not. It's also about deciding what matters and letting go of the rest. A symphonic approach to our job and our ability to bring it all together for our customer will be greatly appreciated

- Empathy. Empathy is emotional. It's about putting yourself in your customer's shoes. It involves an understanding of the importance of the nonverbal cues of others and being aware of your own. Good consultants have the ability to put themselves in the position of the user. This is a talent, perhaps, more than it's a skill that can be taught, but everyone can get better at this. Everyone surely knows of a brilliant adviser who seems incapable of understanding how anyone could possibly be confused by his (or her) explanation of how to create a production schedule using repetitive manufacturing in SAP — in fact he's quite annoyed by the suggestion that anyone could "be so thick" as to not understand what is so "obvious" to him.

We can certainly see how empathy helps a consultant in the course of an engagement. Empathy allows a consultant, even without thinking about it, to notice when the audience is "getting it" and when they are not. The empathetic consultant can make adjustments based on his reading of this particular Users group. This is important since I have witnessed all too often how advisers impose their strict methodology without even knowing if it can help. As an example, I know of a consulting company which comes into every customer site with the pitch to "reduce 30% of their inventory, increase service levels by 20% and fix their exception handling and the way they do inventory analysis (without knowing the way they do it today)". That kind of behavior has absolutely nothing to do with empathy. It rather is a desperate attempt to get a revenue-rich project when one doesn't care about the customer's real pain and needs.

- Play: In the conceptual age, says Pink, work is not just about seriousness but about play as well. Pink quotes University of Pennsylvania professor, Brain Sutton-Smith who says, "The opposite of play isn't work. It's depression. To play is to act out and be willful, exultant and committed as if one is assured of one's prospects."

Indian physician Madan Kataria points out in Pink's book that many people think that serious people are the best suited for business, that serious people are more responsible. "[But] that's not true," says Kataria. "That's yesterday's news. Laughing people are more creative people. They are more productive people." Somewhere along the line we were sold the idea that a real business project must necessarily be dull, devoid of humor and something to be endured not enjoyed.

Let's employ more lego models, the beer game as a way to visualize the impact of the bullwhip effect and bathtubs to demonstrate Little's Law. It will raise the interest level but, more important, take the seriousness and dullness out and put some fun and smiles in. As Pink points out, "Laughter is a form of nonverbal communication that conveys empathy and that is even more contagious than the yawn..."

- Meaning: I don't want to put too fine a point on this, but performing well on an SAP project, is an opportunity to make a small difference in the world (for your customer, their employees, your fellow consultants). An SAP project gone bad can have a devastating impact on your spirit and on your career. But an optimization which goes insanely well can be extremely fulfilling for you and everybody involved. Some say that we "are born for meaning" and live for self-expression and an opportunity to share that which we feel is important. If you are lucky, you feel passionate about your job. If so, then it's with excitement that you look forward to the possibility of sharing your expertise — your story — with others. Few things can be more rewarding than connecting with someone, with teaching something new, or sharing that which you feel is very important with others.

Frankly, the bar is often rather low. SAP customers are so used to less-than-excellent performance that they've seemingly learned to see it as "normal" even if not ideal. However, if you are different, if you exceed expectation and show them that you've thought about them, done your homework and know your material, and demonstrated through your actions how much you appreciate being there and that you are there for them, chances are you'll make an impact and a difference, even if it's just in the smallest of ways. There can be great meaning in even these small connections

Getting the opportunity to work with SAP users and having the stage to present my ideas, has been most rewarding to me. It's an opportunity to share knowledge and experience, broaden my own network, and it serves as good practice. What could be better?

Thursday, October 18, 2012

have you ever wondered if you can exclude certain movements from your consumption history, when you analyze your inventories? As an example: very often I am asked if we can exclude transfer postings from being included in the consumption history of a material, because it distorts the result.

Well, in standard SAP you have two sources of consumption history. Either table MVER or info structure S031. And neither one lets you exclude certain movements or objects.

This is where Marc Hoppe and his team from SAP Consulting with their Add-On tools come into play again.

With their Add-On tool MRP Monitor comes a Material Document Aggregation tool which can provide the basis for your Analysis. This tool allows you to fill a table with consumption history to your liking. There are many selection criteria as you can see in the screen print below.

But more than that, it also allows you to calculate stock levels and dead stock. It is important that only the movements you selected before, are taken into account to calculate KPIs like average inventory, turns and dead stock. Standard SAP (and those inventory reducing analyzers out there) can't give you this.

Below an explanation on how the MDA stock calculation works.

So when the MDA (Material Document Aggregation) is done, you have a table filled with the consumption history and inventory KPIs that are including only those movements, special stocks, transactions and materials (you can exclude No-Movers or extreme slow movers, materials marked for deletion or zero stock items) that are relevant for your analysis.

This table is usually initialized for a period of two years into the past and then you set up a job that runs every months to append the recent values.

It is also possible to create several variations of the MDA for ad hoc and What If Analytics.

Once you're done with the MDA, you will have the appropriate data basis to perform Inventory Analysis and Optimization with the Add - On tools MRP Monitor, Inventory Cockpit or Service Level Monitor and much more.

Wednesday, October 17, 2012

Yesterday I wrote about our trouble defining policies when you can't figure out what planning strategy ZY does.

Today I find myself in Capacity Planning, Scheduling and Costing and a similar, frustrating meeting is taking place: For some reason the available capacity, the capacity load from the orders and the cost calculated for actual activities did not make sense.

In the capacity screen it was defined that 2 capacities are available from 8 am to 5pm with 1 hour break every workday. Therefore the available capacity was 16 hours per day. But in CM01 the available capacity showed 32 hours every day?!

Similar things were going on with the capacity load and the cost. It just didn't make sense.

As we tried to get to the bottom of it, we realized that, during the implementation it was decided to not use the formulas provided in standsrd SAP but to use Z formulas. Everywhere we looked at, there was a customized formula starting with a Z. As we checked these formulas, which was a very time consuming effort, we found many, many errors.

Long story, short answer: we had to reconfigure every resource and used the standard value keys and formulas. And of course it worked and the expected results came showing... But that was a hell of an effort!

My question is: Why would anyone NOT use the standard formula to calculate available capacity? Is the available capacity really different in your company as it is in another? Or did you get infected with the deZse that so many SAP customers suffer from?

Monday, October 15, 2012

Not too long ago I was asked to improve on a customers finished goods planning process. Naturally, we explored their decision making and segmentation of MTS versus MTO and the according availability checking procedures, lead times and handling of the forecast with its consumption for MTS.

In SAP, the driving force and central object for this kind of thing is the 'strategy group' in MRP3 of its MMR.

And there we found a ZF, a ZS, a Z5 and many more. But there was not even one standard strategy group in use. As you know the strategy group has a main strategy which drives automatic requirements determination, so I was checking in customizing and found strategies ZS, ZF and Z5. Well... on I went to see what these Zs do. In the customizing table for the strategy I then found planning requirements types and customer requirements types... All starting with Z. Then the settlement rule: ZSFG and behind that were Z accounts. So I was digging into the requirements type and everything started - you guessed it right - with Z.

At this point I gave up because it was absolutely impossible to figure out anything about what the implementation team had in mind or what we could do to change a finished good from MTO to MTS when it was evident that the sales became very predictable.

All we could do was to recommend a complete reconfiguration. With a lot of effort we helped the customer to run everything off the standard strategies like 40, 10, 20, 30, 52, 81 and the like. Not one Z! They can now analyze and classify and flexibly, effortlessly apply the most effective strategy (or policy) for any given situation.

I have not yet seen ANY situation that could not be resolved with one of the standard strategies.

Don't do the Z thing. And don't let anyone tell you that every change requires the creation of a Z record. This is customization. This is why SAP gives you the customization tables. This is why when you want your own settlement rule, you change strategy 20 to customize the MTO strategy to your specific needs. You CUSTOMIZE SAP so it works for you and you don't recreate an SAP system into a ZAP system that no one will ever understand.

Saturday, October 13, 2012

Very often I see material planners using a reorder level procedure when Kanban could be a much better choice. Why? Because they think Kanban is difficult to set up and manage (or their advisors do not know about Kanban).

In any case; both are consumption based strategies, meaning that the replenishment is driven by its consumption history. The history determines the inventory level for the replenishment signal - in the reorder level procedure it's the reorder point and in Kanban it's the container quantity.

Therefore both procedures are much alike. However there are some very important differences.

Kanban in SAP does not require the MRP run to generate a replenishment order. In reorder planning the MRP run gets a signal after the reorder point is broken. But there passes some time before MRP runs and then all it does is creating a proposal. Kanban generates the replenishment right at the time when the bin is reported 'empty'. And it can create a fixed replenishment (e.g. a production order) right away; and release it too; and print the papers at the work station! All without the MRP run.

Also, in reorder planning you only have one replenishment order at any given time wheras in Kanban you can have many containers and every time a container is empty, an order is created to fill it back up.

Maybe the most important advantage of Kanban is that the replenishment quantity can be calculated using future demand. A reorder level procedure can only look into the past for the setting of the reorder point (considering external requirements with a V1 only increases the current lot size but does not allow for planning with future demand - as the Kanban quantity calculation does).

Setting up Kanban is easy. You create a control cycle in which you identify the number of containers and the quantity each holds, a supply area and a replenishment strategy that determines what replenishment element is generated when a container is reported 'empty'.

And here is a bit of confusion. How do you let SAP know that the container is empty? I have seen programs that use inventory management transactions to set the container empty. That is not how Kanban works! Kanban is a visual system. When a container is empty it should be set to 'empty' right away. And not after the goods issue is posted.

Use a monitor with the Kanban board or a barcode reader to set the bin to empty. In that case you start the replenishment when you need it and you bring in nothing if nothing goes out. It's as simple and effective as that.

There is a dilemma with materials planning in SAP! I even go as far as saying "if you have more than 500 materials, it is impossible to perform effective materials planning with standard SAP ERP - unless you hire 20 materials planners".

Before I can give weight to this statement, we will have to take a few steps back and explore what constitutes 'effective materials planning'. I believe that any materials planner's activities should include a thorough classification or segmentation of their portfolio. This segmentation needs to be carried out periodically (monthly, quarterly, yearly depending on the type of business you are in) since the world is changing and what was consistent yesterday might be inconsistent tomorrow.

This segmentation should at least include an ABC analysis for value and an XYZ analysis for variability but an 'effective materials planning' tool should also include EFG (for lead times), UVW (for price and cost), LMN (for volume or size) and LRODI (life cycle classification). After you perform these types of analysis, you have now segmented your portfolio into classes. That means you have now a subset of materials in the AXF class whereas others are classified in the CXW class. SAP standard has an ABC analysis but does not provide for any of the other ones.

Next, the planner would assign a policy to each class. A policy is a set of parameter combinations which drive automation and follow a certain strategy to handle the materials. PD is not a policy! But in combination with a coverage profile, lot size indicator 'WB' and strategy group '40', it becomes one. In fact every materials planner should have a set of policies to choose from when performing effective materials planning. In standard SAP there is unfortunately no routine that could possibly check on the consistency of a value combination for a policy. That would be an impossible task since the possible combinations are endless.

Now the biggest problem with policy setting is the work that is involved when manually updating one material at a time. A lot of people would argue that you have to update one at a time because that helps the planner to understand the various settings. I agree wholeheartedly that the planner has to understand every field in MRP 1, 2,3 and 4, but, to make them update every material every quarter with the appropriate policy is an impossible task.

So what should you do? Build yourself a library of policies. If done right, this is a process of better understanding what each parameter does, but more importantly, what these parameters do when used in combination - as a policy. Once a library of policies exist, perform a segmentation and break your portfolio down into classes. Then assign to each class (and their respective materials) an appropriate policy - as a mass update so that you can perform this task periodically without having to spend an impossible amount of time updating individual materials. After you are finished, you use the exception monitor to perform your daily tactical planning.

As I mentioned before, standard SAP ERP only provides for an ABC analysis and to mass update a policy is not really possible (I know there is the MRP profile but it's cumbersome to use and does not provide all the parameters necessary)

A very effective solution is the Add-On tool 'MRP Monitor' by SAP Consulting. The MRP Monitor provides all the required analysis and has a function to select a specific class and update all the materials within that class with a respective parameter combination or policy

the screenshot above details the results screen of the MRP Monitor. In section (1) you can select various analysis strategies, in section (2) you can see the classification and a graphical representation in section (3). Section (4) provides a list of all materials within a specific class. You can now, as an example, select all AXF items and update these materials with a specific policy as shown below

using these tools - all developed by SAP, within the SAP namespace - your materials planners are now enabled to maintain ALL materials in their portfolio. But not only that - they can now also adjust the policy periodically when things are changing.

How can anyone with a portfolio of thousands of materials do without it?

as you probably know, there is no functionality in SAP ERP to perform a multi-level availability check throughout your supply chain. If you have a network of multiple DCs and manufacturing plants and a customer order needs to check where in the network there is inventory, then the ERP check can look from a specific DC back to the source for that DC... and no further.

The Global ATP Check in APO can do it, but if you have no APO, you have to resort to other means.

A valid solution to the problem is using the special procurement indicator 'Direct Production'. Assume you have a DC in Ohio, a Warehouse in Texas and the manufacturing plant also in Texas. If the warehouse is close enough to the plant, you don't need stock transport orders to move the product to the warehouse but you can use direct production. That means that the Production Order is visible in the Warehouse.

Now if the DC in Ohio receives a customer order asking for more than what is in inventory, the availability check looks in the warehouse in Texas and if there is no inventory either, it can check whether a future production order would provide enough quantity to fulfill the order in Ohio. Note that this only works because the production order is visible in the Warehouse's MD04 through direct production. The availability check can not look into the manufacturing plant - it stops at the warehouse.

This solution is not nearly as sophisticated as the Global ATP in APO, but, at least it gives you one more entity for the scope of check.

Tuesday, October 9, 2012

Assume you have a distribution network around the globe and use SAP's intra stock transport order process for movements from plant to plant (inside a company code) and the inter stock transport order process for movements between plants from different countries. Your DCs most likely have a VSF forecast that creates demand for product. The MRP run then generates stock transport orders so that the product gets shipped from the plants and that there is enough inventory to sell to the customer quickly from stock.

Just recently I found out that for those stock transport orders the same availability checking screen can pop up as it does for Sales Orders. This is new functionality that came with EHP4 or 5 (I'm not quite sure).

This opens up a number of opportunities!

But first you need to set up the master record correctly. What's important is that there are:

Here is my suggested setup for the demanding plant (the DC / Warehouse that has the VSF and sells to customers) and its implications:

1. The checking rule: set it up so it includes safety stock and available stock and check WITH replenishment lead time. Include Purchase and Production orders but not planned orders or requisitions.

This means: when the DCs STO finds stock in the delivering plant, it confirms the shipping date after the Planned Delivery Time + GR processing Time.

When there is no available stock in the delivery plant but there is a fixed receipt (like from a production order), it will confirm the shipment date to the date the receipt is confirmed + Planned Deliveyr Time + GR processing time.

When there is no stock and no receipt, it will use the Total Replenishment Lead Time in MRP3 to confirm the shipment date (but only if the procurement type in MRP2 is set to E).

2. Total Replenishment Lead Time: this is the estimated timespan it takes to replenish the product from scratch through the entire supply chain. Set it to a value that you feel comfortable quoting to your customer when you have no stock.

3. Planned delivery time (and GR processing time): represents the time to transport the product from the delivering plant to the warehouse when its freely available to transport.

4. Special Procurement Type: points the demand to the specific delivering plant. When MRP runs it covers open demand by generating stock transport requisitions pointing to the plant defined in the special procurement type. These STOs are offset by the planned delivery time.

Procurement Type: this is the tricky part. You would think it should be set to 'F' for external procurement so it generates requisitions. In that case the TRLT would not be considered. Therefore you need to set it to 'E' (because you set a special procurement indicator it will still create a requisition) and in that case the TRLT is used in case there is no stock or fixed receipt in the delivering plant.

Note that MRP works with the Planned Delivery Time to plan for transport whereas the availability check looks for stock or else, uses the Total Replenishment Lead Time to meet demand.

Did you know... (send an email to uwe@bigbytesoftware.com if you want me to elaborate)

that MF50 is a great transaction to do production scheduling... even with discrete orders!

that the coverage profile does not only drive your inventory to a dynamic, minimum safety stock, but also keeps your stock below a maximum? You will have to make sure though, that you use lot size indicator 'EX'

that you can collectively availability check all planned orders with transaction MDVP. Make sure you customize a layout that directs the check with your desired functions.

that you can collectively availability check production orders with transaction COMAC

that you can perform an approximate capacity check on your production plant right out of the long term forecast in ERP. That way you do not send infeasable numbers to MRP

that you can use the availability check during production order release to control WIP levels in the cell or line? Set the control so that orders with missing capacity can't be released